Exhibit 99.1
E*TRADE FINANCIAL Corporation Announces First Quarter 2009 Results
NEW YORK--(BUSINESS WIRE)--April 28, 2009--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC)
First Quarter Results
- Total Net Revenue of $497 million
- Provision for Loan Losses of $454 million
- Net Loss of $233 million, or $0.41 per share
- Total Daily Average Revenue Trades (DARTs) of 194,000
- Record brokerage accounts of 2.7 million, with net new brokerage accounts of 63,000
- Record customer accounts of 4.5 million, with net new accounts of 56,000
- Total customer cash and deposits of $34.4 billion
- Total net new customer assets of $3.5 billion
Capital and Liquidity Metrics
- Bank Tier-1 and risk-based capital ratios of 5.63% and 11.85%, respectively
- Bank excess risk-based capital (excess to the regulatory well-capitalized threshold) of
$451 million - Corporate cash of $406 million; Bank cash of $3.9 billion; unused FHLB lines of $10.0 billion
E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2009, reporting a net loss of $233 million, or $0.41 per share, compared with a net loss of $276 million, or $0.50 per share, in the prior quarter and a net loss of $91 million, or $0.20 per share, a year ago.
The Company reported total DARTs of 194,000 in the first quarter, an eight percent year-over-year increase, although a 10 percent decrease from the record levels of the prior quarter. The Company added 63,000 net new brokerage accounts during the period. At quarter end, E*TRADE reported a record 4.5 million customer accounts, which included a record 2.7 million brokerage accounts. Customer net new assets were $3.5 billion during the quarter. Total customer cash and deposits increased $2.1 billion, in part due to the continued growth of the Complete Savings Account despite a 1.56 percentage point drop in annual percentage yield during the quarter. Margin receivables declined from $2.8 to $2.4 billion.
“E*TRADE’s growth in net new brokerage accounts and customer assets was the result of a renewed focus on our core investor base, strong activity by existing customers across a full range of products, and a gain in market share versus traditional brokerage firms,” said Donald H. Layton, Chairman and CEO, E*TRADE FINANCIAL Corporation. “Transaction volumes were also strong in the first quarter on continued volatility and late-quarter rising markets.”
Commissions, fees and service charges, principal transactions, and other revenue for the first quarter were $202 million, which compared with $224 million in the fourth quarter. This reflects lower revenue from the decline in DARTs from last quarter’s record levels, fewer trading days in the quarter and lower revenue from principal transactions, partially offset by an increase in average commission per trade.
The Company reported net interest income of $279 million, an increase from $274 million in the fourth quarter, as a result of maintaining the level of interest earning assets and a slight increase in the interest income spread to 234 basis points. Total operating expense declined by $27 million to $294 million from the prior quarter and declined by $60 million year over year.
The Company continued to make progress during the first quarter in reducing balance sheet risk, shrinking its bank loan portfolio by approximately $1 billion from last quarter, of which approximately $700 million was related to prepayment or scheduled principal reductions.
In the home equity portfolio, which represents the Company’s greatest exposure to loan losses, special mention delinquencies (30-89 days) decreased 25 percent in the quarter, while “at risk” delinquencies (30-179 days) declined five percent. Total special mention delinquencies for the Company’s loan portfolio, which also includes one- to four-family and consumer and other loans, declined by 10 percent in the quarter.
“We continue to believe that E*TRADE’s loan portfolio is further advanced in the credit cycle than the broader industry,” said Mr. Layton. “Our home equity portfolio is showing signs of improving performance, with declines in special mention delinquencies in each month of the quarter; however, continued deterioration in the one- to four-family and consumer and other portfolios necessitated further reserve building this quarter.”
First quarter provision for loan losses decreased $59 million from the prior quarter to $454 million. Total allowance for loan losses increased $120 million to $1.2 billion, or five percent of gross loans receivable, as the Company increased its one- to four-family and consumer and other portfolio reserves. Total net charge-offs in the quarter were $334 million, an increase of $27 million from the prior quarter.
The Company reported Bank Tier-1 and risk-based capital ratios of 5.63 percent and 11.85 percent, respectively. The Bank had excess Tier-1 capital of $288 million and excess risk-based capital (i.e., above the level regulations define as well-capitalized) of $451 million as of March 31, 2009. The Company noted that subsequent to the end of the quarter, it injected an additional $150 million of capital into the Bank.
“Given the uncertainties of the current environment, we believe that it is necessary to further improve the Company’s capital position,” said Mr. Layton. “We have been increasing our efforts to reduce the size of the Bank’s balance sheet and the associated risk, to deleverage the Parent company’s capital structure, and also to generate additional capital to inject into the Bank.” The Company noted that such efforts would involve public market issuance and/or private investors and would create significant dilution to current shareholders; deleveraging of the Parent would also substantially reduce its interest expense.
The Company also noted that its primary banking regulator, the Office of Thrift Supervision, has advised the Company to address these capital requirements in the near term, including both raising new capital for E*TRADE Bank and reducing the leverage of the Parent holding company. One alternative that the Company continues to pursue is the U.S. Treasury’s TARP Capital Purchase Program which, if it is made available, would likely have additional conditions that would also produce significant dilution. The Company can not predict when or if its application will be acted upon.
Historical monthly metrics from January 2006 to March 2009 can be found on the E*TRADE FINANCIAL Investor Relations site at https://investor.etrade.com.
The Company will host a conference call to discuss the results beginning at 5:00 p.m. EDT today. This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 for international participants. The conference ID number is 93649598. A live audio webcast and replay of this conference call will also be available at https://investor.etrade.com.
About E*TRADE FINANCIAL
The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to retail investors. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.
Important Notice
E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, including changes to the U.S. Treasury’s Troubled Asset Relief Program, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption “Risk Factors”) and quarterly reports on Form 10-Q. Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.
© 2009 E*TRADE FINANCIAL Corporation. All rights reserved.
Financial Statements
E* TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | ||||||||||||||
Consolidated Statement of Loss | ||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | ||||||||||||||
March 31, | December 31, | March 31, | ||||||||||||
2009 | 2008 | 2008 | ||||||||||||
Revenue: | ||||||||||||||
Operating interest income | $ | 486,637 | $ | 540,204 | $ | 699,591 | ||||||||
Operating interest expense | (207,975 | ) | (266,107 | ) | (373,220 | ) | ||||||||
Net operating interest income | 278,662 | 274,097 | 326,371 | |||||||||||
Commission | 125,626 | 141,548 | 122,255 | |||||||||||
Fees and service charges | 46,715 | 44,441 | 54,941 | |||||||||||
Principal transactions | 17,642 | 25,336 | 20,490 | |||||||||||
Gain (loss) on loans and securities, net | 16,507 | (11,410 | ) | (8,567 | ) | |||||||||
Other revenue | 12,191 | 12,421 | 13,604 | |||||||||||
Total non-interest income | 218,681 | 212,336 | 202,723 | |||||||||||
Total net revenue | 497,343 | 486,433 | 529,094 | |||||||||||
Provision for loan losses | 453,963 | 512,874 | 233,871 | |||||||||||
Operating expense: | ||||||||||||||
Compensation and benefits | 84,172 | 80,531 | 123,128 | |||||||||||
Clearing and servicing | 42,671 | 47,970 | 44,885 | |||||||||||
Advertising and market development | 43,591 | 44,684 | 57,448 | |||||||||||
Communications | 21,561 | 24,169 | 25,094 | |||||||||||
Professional services | 19,630 | 27,814 | 23,645 | |||||||||||
Occupancy and equipment | 19,541 | 23,100 | 20,498 | |||||||||||
Depreciation and amortization | 20,274 | 19,876 | 21,653 | |||||||||||
Amortization of other intangibles | 7,436 | 7,764 | 10,910 | |||||||||||
Facility restructuring and other exit activities | (112 | ) | 977 | 10,566 | ||||||||||
Other | 35,220 | 44,564 | 16,506 | |||||||||||
Total operating expense | 293,984 | 321,449 | 354,333 | |||||||||||
Loss before other income (expense), income tax benefit and discontinued operations | (250,604 | ) | (347,890 | ) | (59,110 | ) | ||||||||
Other income (expense): | ||||||||||||||
Corporate interest income | 424 | 1,591 | 2,426 | |||||||||||
Corporate interest expense | (87,315 | ) | (87,898 | ) | (95,241 | ) | ||||||||
Gain (loss) on sales of investments, net | (433 | ) | (4,537 | ) | 502 | |||||||||
Loss on early extinguishment of debt | (2,999 | ) | - | (2,851 | ) | |||||||||
Equity in income (loss) of investments and venture funds | (3,129 | ) | (6,608 | ) | 4,699 | |||||||||
Total other income (expense) | (93,452 | ) | (97,452 | ) | (90,465 | ) | ||||||||
Loss before income tax benefit and discontinued operations | (344,056 | ) | (445,342 | ) | (149,575 | ) | ||||||||
Income tax benefit | (111,371 | ) | (169,117 | ) | (56,648 | ) | ||||||||
Loss from continuing operations | (232,685 | ) | (276,225 | ) | (92,927 | ) | ||||||||
Discontinued operations, net of tax: | ||||||||||||||
Income from discontinued operations | - | - | 1,734 | |||||||||||
Gain on disposal of discontinued operations | - | 662 | - | |||||||||||
Income from discontinued operations, net of tax | - | 662 | 1,734 | |||||||||||
Net loss | $ | (232,685 | ) | $ | (275,563 | ) | $ | (91,193 | ) | |||||
Basic loss per share from continuing operations | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.20 | ) | |||||
Basic earnings per share from discontinued operations | - | 0.00 | 0.00 | |||||||||||
Basic net loss per share | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.20 | ) | |||||
Diluted loss per share from continuing operations | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.20 | ) | |||||
Diluted earnings per share from discontinued operations | - | 0.00 | 0.00 | |||||||||||
Diluted net loss per share | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.20 | ) | |||||
Shares used in computation of per share data: | ||||||||||||||
Basic | 567,833 | 548,638 | 460,857 | |||||||||||
Diluted(1) | 567,833 | 548,638 | 460,857 |
E* TRADE FINANCIAL CORPORATION AND SUBSIDIARIES | ||||||||
Consolidated Balance Sheet | ||||||||
(In thousands, except share amounts) | ||||||||
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Cash and equivalents | $ | 4,492,306 | $ | 3,853,849 | ||||
Cash and investments required to be segregated under federal or other regulations | 1,900,235 | 1,141,598 | ||||||
Trading securities | 46,309 | 55,481 | ||||||
Available-for-sale mortgage-backed and investment securities | 11,823,392 | 10,806,094 | ||||||
Margin receivables | 2,436,611 | 2,791,168 | ||||||
Loans, net | 23,271,969 | 24,451,852 | ||||||
Investment in Federal Home Loan Bank stock | 183,863 | 200,892 | ||||||
Property and equipment, net | 321,934 | 319,222 | ||||||
Goodwill | 1,952,326 | 1,938,325 | ||||||
Other intangibles, net | 378,699 | 386,130 | ||||||
Other assets | 2,639,232 | 2,593,604 | ||||||
Total assets | $ | 49,446,876 | $ | 48,538,215 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Deposits | $ | 27,641,485 | $ | 26,136,246 | ||||
Securities sold under agreements to repurchase | 6,946,160 | 7,381,279 | ||||||
Customer payables | 4,181,332 | 3,753,332 | ||||||
Other borrowings | 4,083,033 | 4,353,777 | ||||||
Corporate debt | 2,752,673 | 2,750,532 | ||||||
Accounts payable, accrued and other liabilities | 1,384,042 | 1,571,553 | ||||||
Total liabilities | 46,988,725 | 45,946,719 | ||||||
Shareholders' equity: | ||||||||
Common stock, $0.01 par value, shares authorized: 1,200,000,000; shares issued and outstanding: 572,051,743 at March 31, 2009 and 563,523,086 at December 31, 2008 | 5,721 | 5,635 | ||||||
Additional paid-in-capital | 4,084,643 | 4,064,282 | ||||||
Accumulated deficit | (1,078,452 | ) | (845,767 | ) | ||||
Accumulated other comprehensive loss | (553,761 | ) | (632,654 | ) | ||||
Total shareholders' equity | 2,458,151 | 2,591,496 | ||||||
Total liabilities and shareholders' equity | $ | 49,446,876 | $ | 48,538,215 |
Segment Reporting | ||||||||||||||||
Three Months Ended March 31, 2009 | ||||||||||||||||
Trading and | Balance Sheet | Eliminations(2) | Total | |||||||||||||
Revenue: | (In thousands) | |||||||||||||||
Operating interest income | $ | 259,626 | $ | 444,292 | $ | (217,281 | ) | $ | 486,637 | |||||||
Operating interest expense | (97,951 | ) | (327,305 | ) | 217,281 | (207,975 | ) | |||||||||
Net operating interest income | 161,675 | 116,987 | - | 278,662 | ||||||||||||
Commission | 125,626 | - | - | 125,626 | ||||||||||||
Fees and service charges | 45,055 | 1,660 | - | 46,715 | ||||||||||||
Principal transactions | 17,642 | - | - | 17,642 | ||||||||||||
Gain (loss) on loans and securities, net | (22 | ) | 16,529 | - | 16,507 | |||||||||||
Other revenue | 8,894 | 3,297 | - | 12,191 | ||||||||||||
Total non-interest income | 197,195 | 21,486 | - | 218,681 | ||||||||||||
Total net revenue | 358,870 | 138,473 | - | 497,343 | ||||||||||||
Provision for loan losses | - | 453,963 | - | 453,963 | ||||||||||||
Operating expense: | ||||||||||||||||
Compensation and benefits | 69,643 | 14,529 | - | 84,172 | ||||||||||||
Clearing and servicing | 20,776 | 21,895 | - | 42,671 | ||||||||||||
Advertising and market development | 43,586 | 5 | - | 43,591 | ||||||||||||
Communications | 21,462 | 99 | - | 21,561 | ||||||||||||
Professional services | 12,908 | 6,722 | - | 19,630 | ||||||||||||
Occupancy and equipment | 19,673 | (132 | ) | - | 19,541 | |||||||||||
Depreciation and amortization | 17,705 | 2,569 | - | 20,274 | ||||||||||||
Amortization of other intangibles | 7,436 | - | - | 7,436 | ||||||||||||
Facility restructuring and other exit activities | (87 | ) | (25 | ) | - | (112 | ) | |||||||||
Other | 23,618 | 11,602 | - | 35,220 | ||||||||||||
Total operating expense | 236,720 | 57,264 | - | 293,984 | ||||||||||||
Segment income (loss) | $ | 122,150 | $ | (372,754 | ) | $ | - | $ | (250,604 | ) | ||||||
Three Months Ended December 31, 2008 | ||||||||||||||||
Trading and | Balance Sheet | Eliminations(2) | Total | |||||||||||||
Revenue: | (In thousands) | |||||||||||||||
Operating interest income | $ | 319,679 | $ | 483,290 | $ | (262,765 | ) | $ | 540,204 | |||||||
Operating interest expense | (134,621 | ) | (394,251 | ) | 262,765 | (266,107 | ) | |||||||||
Net operating interest income | 185,058 | 89,039 | - | 274,097 | ||||||||||||
Commission | 141,484 | 64 | - | 141,548 | ||||||||||||
Fees and service charges | 44,238 | 203 | - | 44,441 | ||||||||||||
Principal transactions | 25,336 | - | - | 25,336 | ||||||||||||
Loss on loans and securities, net | (57 | ) | (11,353 | ) | - | (11,410 | ) | |||||||||
Other revenue | 9,186 | 3,243 | (8 | ) | 12,421 | |||||||||||
Total non-interest income (loss) | 220,187 | (7,843 | ) | (8 | ) | 212,336 | ||||||||||
Total net revenue | 405,245 | 81,196 | (8 | ) | 486,433 | |||||||||||
Provision for loan losses | - | 512,874 | - | 512,874 | ||||||||||||
Operating expense: | ||||||||||||||||
Compensation and benefits | 62,809 | 17,722 | - | 80,531 | ||||||||||||
Clearing and servicing | 22,957 | 25,021 | (8 | ) | 47,970 | |||||||||||
Advertising and market development | 44,684 | - | - | 44,684 | ||||||||||||
Communications | 23,791 | 378 | - | 24,169 | ||||||||||||
Professional services | 15,709 | 12,105 | - | 27,814 | ||||||||||||
Occupancy and equipment | 22,135 | 965 | - | 23,100 | ||||||||||||
Depreciation and amortization | 16,441 | 3,435 | - | 19,876 | ||||||||||||
Amortization of other intangibles | 7,764 | - | - | 7,764 | ||||||||||||
Facility restructuring and other exit activities | 141 | 836 | - | 977 | ||||||||||||
Other | 36,122 | 8,442 | - | 44,564 | ||||||||||||
Total operating expense | 252,553 | 68,904 | (8 | ) | 321,449 | |||||||||||
Segment income (loss) | $ | 152,692 | $ | (500,582 | ) | $ | - | $ | (347,890 | ) | ||||||
Three Months Ended March 31, 2008 | ||||||||||||||||
Trading and | Balance Sheet | Eliminations(2) | Total | |||||||||||||
Revenue: | (In thousands) | |||||||||||||||
Operating interest income | $ | 416,684 | $ | 590,121 | $ | (307,214 | ) | $ | 699,591 | |||||||
Operating interest expense | (209,378 | ) | (471,056 | ) | 307,214 | (373,220 | ) | |||||||||
Net operating interest income | 207,306 | 119,065 | - | 326,371 | ||||||||||||
Commission | 121,669 | 586 | - | 122,255 | ||||||||||||
Fees and service charges | 50,877 | 4,064 | - | 54,941 | ||||||||||||
Principal transactions | 20,376 | 114 | - | 20,490 | ||||||||||||
Loss on loans and securities, net | (2 | ) | (8,565 | ) | - | (8,567 | ) | |||||||||
Other revenue | 9,753 | 3,867 | (16 | ) | 13,604 | |||||||||||
Total non-interest income | 202,673 | 66 | (16 | ) | 202,723 | |||||||||||
Total net revenue | 409,979 | 119,131 | (16 | ) | 529,094 | |||||||||||
Provision for loan losses | - | 233,871 | - | 233,871 | ||||||||||||
Operating expense: | ||||||||||||||||
Compensation and benefits | 90,932 | 32,196 | - | 123,128 | ||||||||||||
Clearing and servicing | 20,347 | 24,554 | (16 | ) | 44,885 | |||||||||||
Advertising and market development | 57,444 | 4 | - | 57,448 | ||||||||||||
Communications | 24,102 | 992 | - | 25,094 | ||||||||||||
Professional services | 14,852 | 8,793 | - | 23,645 | ||||||||||||
Occupancy and equipment | 19,640 | 858 | - | 20,498 | ||||||||||||
Depreciation and amortization | 16,910 | 4,743 | - | 21,653 | ||||||||||||
Amortization of other intangibles | 10,910 | - | - | 10,910 | ||||||||||||
Facility restructuring and other exit activities | 182 | 10,384 | - | 10,566 | ||||||||||||
Other | 30,637 | (14,131 | ) | - | 16,506 | |||||||||||
Total operating expense | 285,956 | 68,393 | (16 | ) | 354,333 | |||||||||||
Segment income (loss) | $ | 124,023 | $ | (183,133 | ) | $ | - | $ | (59,110 | ) |
Key Performance Metrics(3) | |||||||||||||
Corporate Metrics | Qtr ended | Qtr ended | Qtr ended | Qtr ended | Qtr ended | ||||||||
Operating margin %(4) | |||||||||||||
Consolidated | N.M. | N.M. | N.M. | N.M. | N.M. | ||||||||
Trading and Investing | 34 % | 38 % | (4)% | 30 % | 4 % | ||||||||
Balance Sheet Management | N.M. | N.M. | N.M. | N.M. | N.M. | ||||||||
Employees | 3,178 | 3,249 | (2)% | 3,565 | (11)% | ||||||||
Consultants and other | 138 | 146 | (5)% | 302 | (54)% | ||||||||
Total headcount | 3,316 | 3,395 | (2)% | 3,867 | (14)% | ||||||||
Revenue per headcount | $ | 149,983 | $ | 143,279 | 5 % | $ | 136,823 | 10 % | |||||
Revenue per compensation and benefits dollar | $ | 5.91 | $ | 6.04 | (2)% | $ | 4.30 | 37 % | |||||
Book value per share | $ | 4.30 | $ | 4.60 | (7)% | $ | 5.80 | (26)% | |||||
Tangible book value per share | $ | 0.22 | $ | 0.47 | (53)% | $ | 0.57 | (61)% | |||||
Corporate cash ($MM)(5) | $ | 406.2 | $ | 434.9 | (7)% | $ | 296.4 | 37 % | |||||
Enterprise net interest spread (basis points)(6) | 234 | 232 | 1 % | 250 | (6)% | ||||||||
Enterprise interest-earning assets, average ($MM) | $ | 44,696 | $ | 44,329 | 1 % | $ | 48,895 | (9)% | |||||
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM) | |||||||||||||
Loss from continuing operations | $ | (232.7) | $ | (276.2) | N.M. | $ | (92.9) | N.M. | |||||
Tax benefit | (111.4) | (169.1) | N.M. | (56.6) | N.M. | ||||||||
Depreciation & amortization | 27.7 | 27.6 | 0 % | 32.6 | (15)% | ||||||||
Corporate interest expense | 87.3 | 87.9 | (1)% | 95.2 | (8)% | ||||||||
EBITDA | $ | (229.1) | $ | (329.8) | N.M. | $ | (21.7) | N.M. | |||||
Interest coverage | (2.6) | (3.8) | N.M. | (0.2) | N.M. | ||||||||
Bank earnings before taxes and before credit losses ($MM)(7) | $ | 180.9 | $ | 164.5 | 10 % | $ | 182.7 | (1)% | |||||
Trading and Investing Metrics | |||||||||||||
Trading days | 61.0 | 63.0 | N.M. | 61.0 | N.M. | ||||||||
DARTs | |||||||||||||
U.S. | 170,586 | 188,748 | (10)% | 155,706 | 10 % | ||||||||
International | 23,896 | 27,201 | (12)% | 24,849 | (4)% | ||||||||
DARTs from continuing operations | 194,482 | 215,949 | (10)% | 180,555 | 8 % | ||||||||
DARTs from discontinued operations | - | - | N.M. | 10,169 | N.M. | ||||||||
Total DARTs | 194,482 | 215,949 | (10)% | 190,724 | 2 % | ||||||||
Total trades from continuing operations (MM) | 11.9 | 13.6 | (13)% | 11.0 | 8 % | ||||||||
Total trades from discontinued operations (MM) | - | - | N.M. | 0.6 | N.M. | ||||||||
Total trades (MM) | 11.9 | 13.6 | (13)% | 11.6 | 3 % | ||||||||
Average commission per trade from continuing operations | $ | 10.59 | $ | 10.40 | 2 % | $ | 11.05 | (4)% | |||||
Average commission per trade from discontinued operations | - | - | N.M. | 10.83 | N.M. | ||||||||
Total average commission per trade | $ | 10.59 | $ | 10.40 | 2 % | $ | 11.04 | (4)% | |||||
End of period margin debt from continuing operations ($B) | $ | 2.46 | $ | 2.81 | (12)% | $ | 6.46 | (62)% | |||||
End of period margin debt from discontinued operations ($B) | - | - | N.M. | 0.24 | N.M. | ||||||||
Total end of period margin debt ($B) | $ | 2.46 | $ | 2.81 | (12)% | $ | 6.70 | (63)% | |||||
Average margin debt from continuing operations ($B) | $ | 2.78 | $ | 3.47 | (20)% | $ | 6.73 | (59)% | |||||
Average margin debt from discontinued operations ($B) | - | - | N.M. | 0.26 | N.M. | ||||||||
Total average margin debt ($B) | $ | 2.78 | $ | 3.47 | (20)% | $ | 6.99 | (60)% | |||||
Gross new brokerage accounts | 147,646 | 192,275 | (23)% | 128,611 | 15 % | ||||||||
Gross new stock plan accounts | 41,216 | 42,558 | (3)% | 46,791 | (12)% | ||||||||
Gross new banking accounts | 49,906 | 55,077 | (9)% | 119,294 | (58)% | ||||||||
Closed accounts(8) | (182,819) | (207,950) | N.M. | (228,750) | N.M. | ||||||||
Net new accounts from continuing operations | 55,949 | 81,960 | (32)% | 65,946 | (15)% | ||||||||
Net new accounts from discontinued operations | - | - | N.M. | (16,400) | N.M. | ||||||||
Net new accounts | 55,949 | 81,960 | (32)% | 49,546 | 13 % | ||||||||
Net new brokerage accounts | 63,241 | 77,241 | (18)% | 24,997 | 153 % | ||||||||
Net new stock plan accounts | (15,868) | (1,332) | N.M. | (26,146) | N.M. | ||||||||
Net new banking accounts | 8,576 | 6,051 | 42 % | 67,095 | (87)% | ||||||||
Net new accounts | 55,949 | 81,960 | (32)% | 65,946 | (15)% | ||||||||
End of period brokerage accounts | 2,660,584 | 2,597,343 | 2 % | 2,477,892 | 7 % | ||||||||
End of period stock plan accounts | 1,002,862 | 1,018,730 | (2)% | 1,028,614 | (3)% | ||||||||
End of period banking accounts(8) | 825,799 | 817,223 | 1 % | 799,572 | 3 % | ||||||||
End of period accounts from continuing operations | 4,489,245 | 4,433,296 | 1 % | 4,306,078 | 4 % | ||||||||
End of period accounts from discontinued operations | - | - | N.M. | 412,790 | N.M. | ||||||||
End of period total accounts | 4,489,245 | 4,433,296 | 1 % | 4,718,868 | (5)% | ||||||||
Net new customers from continuing operations(9) | 50,989 | 69,486 | (27)% | 36,877 | 38 % | ||||||||
Net new customers from discontinued operations and other(9) | - | - | N.M. | 17,160 | N.M. | ||||||||
Total net new customers(9) | 50,989 | 69,486 | (27)% | 54,037 | (6)% | ||||||||
End of period brokerage customers | 2,258,726 | 2,201,862 | 3 % | 2,092,346 | 8 % | ||||||||
End of period all other customers | 955,203 | 961,078 | (1)% | 964,937 | (1)% | ||||||||
End of period total customers(9) | 3,213,929 | 3,162,940 | 2 % | 3,057,283 | 5 % | ||||||||
Segment income per brokerage customer | $ | 159 | $ | 184 | (14)% | $ | 196 | (19)% | |||||
Customer Assets ($B) | |||||||||||||
Security holdings | $ | 67.0 | $ | 69.7 | (4)% | $ | 105.4 | (36)% | |||||
Customer payables (cash)(10) | 4.2 | 3.8 | 11 % | 4.4 | (5)% | ||||||||
Customer cash balances held by third parties | 2.8 | 2.8 | 0 % | 3.3 | (15)% | ||||||||
Unexercised stock plan customer options (vested) | 9.0 | 10.2 | (12)% | 24.5 | (63)% | ||||||||
Customer assets in brokerage and stock plan accounts | 83.0 | 86.5 | (4)% | 137.6 | (40)% | ||||||||
Sweep deposit accounts | 10.2 | 9.6 | 6 % | 10.0 | 2 % | ||||||||
Savings and transaction accounts | 15.1 | 13.7 | 10 % | 12.5 | 21 % | ||||||||
CDs | 2.1 | 2.4 | (13)% | 3.7 | (43)% | ||||||||
Customer assets in banking accounts | 27.4 | 25.7 | 7 % | 26.2 | 5 % | ||||||||
Customer assets from continuing operations | 110.4 | 112.2 | (2)% | 163.8 | (33)% | ||||||||
Customer assets from discontinued operations | - | - | N.M. | 4.6 | N.M. | ||||||||
Total customer assets | $ | 110.4 | $ | 112.2 | (2)% | $ | 168.4 | (34)% | |||||
Net new customer assets from continuing operations ($B)(11) | $ | 3.5 | $ | 3.5 | 0 % | $ | 0.3 | 1067 % | |||||
Net new customer assets from discontinued operations and other ($B)(11) | - | - | N.M. | - | N.M. | ||||||||
Total net new customer assets ($B)(11) | $ | 3.5 | $ | 3.5 | 0 % | $ | 0.3 | 1067 % | |||||
Brokerage related cash ($B) | $ | 17.2 | $ | 16.2 | 6 % | $ | 17.7 | (3)% | |||||
Other customer cash and deposits ($B) | 17.2 | 16.1 | 7 % | 16.2 | 6 % | ||||||||
Total customer cash and deposits from continuing operations ($B) | 34.4 | 32.3 | 7 % | 33.9 | 1 % | ||||||||
Total customer cash and deposits from discontinued operations ($B) | - | - | N.M. | 1.0 | N.M. | ||||||||
Total customer cash and deposits ($B) | $ | 34.4 | $ | 32.3 | 7 % | $ | 34.9 | (1)% | |||||
Unexercised stock plan customer options (unvested) ($B) | $ | 12.0 | $ | 10.7 | 12 % | $ | 20.2 | (41)% | |||||
Market Making | |||||||||||||
Equity shares traded (MM) | 49,824 | 27,418 | 82 % | 33,503 | 49 % | ||||||||
Average revenue capture per 1,000 equity shares | $ | 0.339 | $ | 0.893 | (62)% | $ | 0.566 | (40)% | |||||
% of Bulletin Board equity shares to total equity shares | 86.8% | 80.3% | 7 % | 87.8% | (1)% | ||||||||
Balance Sheet Management Metrics |
|
|
|
|
| ||||||||
Capital Ratios | |||||||||||||
Tier 1 Capital Ratio(12) | 5.63 % | 6.29 % | (0.66)% | 6.78 % | (1.15)% | ||||||||
Risk-based Capital Ratio(12) | 11.85 % | 12.95 % | (1.10)% | 12.36 % | (0.51)% | ||||||||
E*TRADE Bank excess tier 1 capital ($MM)(12) | $ | 288.1 | $ | 578.5 | (50)% | $ | 859.9 | (66)% | |||||
E*TRADE Bank excess risk-based capital ($MM)(12) | $ | 450.5 | $ | 714.7 | (37)% | $ | 695.3 | (35)% | |||||
Loans receivable ($MM) | |||||||||||||
Average loans receivable | $ | 25,083 | $ | 25,997 | (4)% | $ | 29,890 | (16)% | |||||
Ending loans receivable, net | $ | 23,272 | $ | 24,452 | (5)% | $ | 28,425 | (18)% | |||||
One- to Four-Family | |||||||||||||
Loan performance detail ($MM) | |||||||||||||
Current | $ | 11,112 | $ | 11,836 | (6)% | $ | 14,033 | (21)% | |||||
30-89 days delinquent | 587 | 594 | (1)% | 363 | 62 % | ||||||||
90-179 days delinquent | 453 | 273 | 66 % | 151 | 200 % | ||||||||
Total 30-179 days delinquent | 1,040 | 867 | 20 % | 514 | 102 % | ||||||||
180+ days delinquent (net of $110M, $61M and $8M in charge-offs for Q109, Q408 and Q108, respectively) | 429 | 320 | 34 % | 141 | 204 % | ||||||||
Total delinquent loans | 1,469 | 1,187 | 24 % | 655 | 124 % | ||||||||
Gross loans receivable(13) | $ | 12,581 | $ | 13,023 | (3)% | $ | 14,688 | (14)% | |||||
Credit Quality and Reserve Metrics | |||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 4.67% | 4.56% | 0.11 % | 2.47% | 2.20 % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 7.01% | 4.55% | 2.46 % | 1.99% | 5.02 % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 11.68% | 9.12% | 2.56 % | 4.46% | 7.22 % | ||||||||
Total 30-179 days delinquent loans as a % of allowance for loan losses | 336.78% | 468.37% | (131.59)% | 1241.78% | (905.00)% | ||||||||
Allowance for loan losses as a % of gross loans receivable | 2.45% | 1.42% | 1.03 % | 0.28% | 2.17 % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 35.01% | 31.22% | 3.79 % | 14.17% | 20.84 % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 2.10% | 1.74% | 0.36 % | 0.38% | 1.72 % | ||||||||
Provision as a % of average loans receivable (annualized) | 5.97% | 3.56% | 2.41 % | 0.98% | 4.99 % | ||||||||
Home Equity | |||||||||||||
Loan performance detail ($MM) | |||||||||||||
Current | $ | 8,961 | $ | 9,431 | (5)% | $ | 11,029 | (19)% | |||||
30-89 days delinquent | 305 | 408 | (25)% | 277 | 10 % | ||||||||
90-179 days delinquent | 347 | 278 | 25 % | 222 | 56 % | ||||||||
Total 30-179 days delinquent | 652 | 686 | (5)% | 499 | 31 % | ||||||||
180+ days delinquent (net of $21M, $12M and $9M in charge-offs for Q109, Q408 and Q108, respectively) | 72 | 63 | 14 % | 63 | 14 % | ||||||||
Total delinquent loans | 724 | 749 | (3)% | 562 | 29 % | ||||||||
Gross loans receivable(13) | $ | 9,685 | $ | 10,180 | (5)% | $ | 11,591 | (16)% | |||||
Credit Quality and Reserve Metrics | |||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 3.15% | 4.00% | (0.85)% | 2.39% | 0.76 % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 4.33% | 3.35% | 0.98 % | 2.46% | 1.87 % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 7.48% | 7.35% | 0.13 % | 4.85% | 2.63 % | ||||||||
Total 30-179 days delinquent loans as a % of allowance for loan losses | 79.62% | 82.30% | (2.68)% | 101.64% | (22.02)% | ||||||||
Allowance for loan losses as a % of gross loans receivable | 8.45% | 8.19% | 0.26 % | 4.23% | 4.22 % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 195.07% | 244.34% | (49.27)% | 172.18% | 22.89 % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 9.79% | 8.72% | 1.07 % | 5.02% | 4.77 % | ||||||||
Provision as a % of average loans receivable (annualized) | 9.18% | 14.18% | (5.00)% | 6.09% | 3.09 % | ||||||||
|
|
|
|
|
| ||||||||
Consumer and Other | |||||||||||||
Loan performance detail ($MM) | |||||||||||||
Current | $ | 2,157 | $ | 2,288 | (6)% | $ | 2,682 | (20)% | |||||
30-89 days delinquent | 41 | 33 | 24 % | 23 | 78 % | ||||||||
90-179 days delinquent | 8 | 7 | 14 % | 6 | 33 % | ||||||||
Total 30-179 days delinquent | 49 | 40 | 23 % | 29 | 69 % | ||||||||
180+ days delinquent | 1 | 1 | 0 % | 1 | 0 % | ||||||||
Total delinquent loans | 50 | 41 | 22 % | 30 | 67 % | ||||||||
Gross loans receivable(13) | $ | 2,207 | $ | 2,329 | (5)% | $ | 2,712 | (19)% | |||||
Credit Quality and Reserve Metrics | |||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 1.85% | 1.43% | 0.42 % | 0.84% | 1.01 % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 0.41% | 0.33% | 0.08 % | 0.26% | 0.15 % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 2.26% | 1.76% | 0.50 % | 1.11% | 1.15 % | ||||||||
Total 30-179 days delinquent loans as a % of allowance for loan losses | 66.47% | 65.02% | 1.45 % | 85.43% | (18.96)% | ||||||||
Allowance for loan losses as a % of gross loans receivable | 3.32% | 2.65% | 0.67 % | 1.24% | 2.08 % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 804.96% | 790.72% | 14.24 % | 471.56% | 333.40 % | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 3.77% | 3.67% | 0.10 % | 1.74% | 2.03 % | ||||||||
Provision as a % of average loans receivable (annualized) | 5.83% | 4.30% | 1.53 % | 2.24% | 3.59 % | ||||||||
Total Loans Receivable | |||||||||||||
Loan performance detail ($MM) | |||||||||||||
Current | $ | 22,230 | $ | 23,555 | (6)% | $ | 27,744 | (20)% | |||||
30-89 days delinquent | 933 | 1,035 | (10)% | 663 | 41 % | ||||||||
90-179 days delinquent | 808 | 558 | 45 % | 379 | 113 % | ||||||||
Total 30-179 days delinquent | 1,741 | 1,593 | 9 % | 1,042 | 67 % | ||||||||
180+ days delinquent | 502 | 384 | 31 % | 205 | 145 % | ||||||||
Total delinquent loans | 2,243 | 1,977 | 13 % | 1,247 | 80 % | ||||||||
Total gross loans receivable(13) | $ | 24,473 | $ | 25,532 | (4)% | $ | 28,991 | (16)% | |||||
Credit Quality and Reserve Metrics | |||||||||||||
Special mention loans (30-89 days delinquent) as a % of gross loans receivable | 3.81% | 4.05% | (0.24)% | 2.29% | 1.52 % | ||||||||
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable | 5.36% | 3.69% | 1.67 % | 2.02% | 3.34 % | ||||||||
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable | 9.17% | 7.74% | 1.43 % | 4.30% | 4.87 % | ||||||||
Total 30-179 days delinquent loans as a % of allowance for loan losses | 144.95% | 147.47% | (2.52)% | 184.09% | (39.14)% | ||||||||
Allowance for loan losses as a % of gross loans receivable | 4.91% | 4.23% | 0.68 % | 1.95% | 2.96 % | ||||||||
Allowance for loan losses as a % of nonperforming loans | 91.60% | 114.70% | (23.10)% | 96.84% | (5.24)% | ||||||||
Net charge-offs as a % of average loans receivable (annualized) | 5.32% | 4.72% | 0.60 % | 2.36% | 2.96 % | ||||||||
Provision as a % of average loans receivable (annualized) | 7.24% | 7.89% | (0.65)% | 3.13% | 4.11 % |
Activity in Allowance for Loan Losses | ||||||||||||||||
Three Months Ended March 31, 2009 | ||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 12/31/08 | $ | 185,163 | $ | 833,835 | $ | 61,613 | $ | 1,080,611 | ||||||||
Provision for loan losses | 190,687 | 230,102 | 33,174 | 453,963 | ||||||||||||
Charge-offs, net | (67,044 | ) | (245,291 | ) | (21,431 | ) | (333,766 | ) | ||||||||
Allowance for loan losses, ending 3/31/09 | $ | 308,806 | $ | 818,646 | $ | 73,356 | $ | 1,200,808 | ||||||||
Three Months Ended December 31, 2008 | ||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 9/30/08 | $ | 125,118 | $ | 691,284 | $ | 57,820 | $ | 874,222 | ||||||||
Provision for loan losses | 117,279 | 369,892 | 25,703 | 512,874 | ||||||||||||
Charge-offs, net | (57,234 | ) | (227,341 | ) | (21,910 | ) | (306,485 | ) | ||||||||
Allowance for loan losses, ending 12/31/08 | $ | 185,163 | $ | 833,835 | $ | 61,613 | $ | 1,080,611 | ||||||||
Three Months Ended March 31, 2008 | ||||||||||||||||
One- to Four- | Home Equity | Consumer | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Allowance for loan losses, ending 12/31/07 | $ | 18,831 | $ | 459,167 | $ | 30,166 | $ | 508,164 | ||||||||
Provision for loan losses | 37,175 | 181,030 | 15,666 | 233,871 | ||||||||||||
Charge-offs, net | (14,603 | ) | (149,366 | ) | (12,158 | ) | (176,127 | ) | ||||||||
Allowance for loan losses, ending 3/31/08 | $ | 41,403 | $ | 490,831 | $ | 33,674 | $ | 565,908 |
Average Enterprise Balance Sheet Data | |||||||||||||
Three Months Ended | |||||||||||||
March 31, 2009 | |||||||||||||
Average | Operating | Average | |||||||||||
Enterprise interest-earning assets: | (In thousands) | ||||||||||||
Loans, net(14) | $ | 25,083,318 | $ | 313,328 | 5.00 | % | |||||||
Margin receivables | 2,751,510 | 26,937 | 3.97 | % | |||||||||
Available-for-sale mortgage-backed securities | 11,173,259 | 125,749 | 4.50 | % | |||||||||
Available-for-sale investment securities | 126,307 | 2,034 | 6.44 | % | |||||||||
Trading securities | 35,528 | 671 | 7.56 | % | |||||||||
Cash and cash equivalents(15) | 4,937,608 | 5,736 | 0.47 | % | |||||||||
Stock borrow and other | 588,748 | 8,101 | 5.58 | % | |||||||||
Total enterprise interest-earning assets | $ | 44,696,278 | 482,556 | 4.32 | % | ||||||||
Enterprise interest-bearing liabilities: | |||||||||||||
Retail deposits | $ | 26,375,688 | 93,433 | 1.44 | % | ||||||||
Brokered certificates of deposit | 293,714 | 3,581 | 4.94 | % | |||||||||
Customer payables | 3,771,868 | 2,802 | 0.30 | % | |||||||||
Repurchase agreements and other borrowings | 7,589,825 | 66,075 | 3.48 | % | |||||||||
FHLB advances | 3,683,600 | 41,204 | 4.47 | % | |||||||||
Stock loan and other | 422,639 | 868 | 0.83 | % | |||||||||
Total enterprise interest-bearing liabilities | $ | 42,137,334 | 207,963 | 1.98 | % | ||||||||
Enterprise net interest income/spread(6) | $ | 274,593 | 2.34 | % | |||||||||
Three Months Ended | |||||||||||||
December 31, 2008 | |||||||||||||
Average | Operating | Average | |||||||||||
Enterprise interest-earning assets: | (In thousands) | ||||||||||||
Loans, net(14) | $ | 25,997,688 | $ | 354,966 | 5.46 | % | |||||||
Margin receivables | 3,463,271 | 39,603 | 4.55 | % | |||||||||
Available-for-sale mortgage-backed securities | 10,391,623 | 118,756 | 4.57 | % | |||||||||
Available-for-sale investment securities | 131,079 | 2,236 | 6.82 | % | |||||||||
Trading securities | 32,361 | 562 | 6.94 | % | |||||||||
Cash and cash equivalents(15) | 3,704,176 | 11,090 | 1.19 | % | |||||||||
Stock borrow and other | 608,608 | 6,971 | 4.56 | % | |||||||||
Total enterprise interest-earning assets | $ | 44,328,806 | 534,184 | 4.82 | % | ||||||||
Enterprise interest-bearing liabilities: | |||||||||||||
Retail deposits | $ | 25,214,422 | 121,745 | 1.92 | % | ||||||||
Brokered certificates of deposit | 663,116 | 8,556 | 5.13 | % | |||||||||
Customer payables | 3,897,877 | 4,346 | 0.44 | % | |||||||||
Repurchase agreements and other borrowings | 7,911,717 | 83,079 | 4.11 | % | |||||||||
FHLB advances | 3,912,839 | 46,467 | 4.65 | % | |||||||||
Stock loan and other | 433,502 | 1,873 | 1.72 | % | |||||||||
Total enterprise interest-bearing liabilities | $ | 42,033,473 | 266,066 | 2.50 | % | ||||||||
Enterprise net interest income/spread(6) | $ | 268,118 | 2.32 | % | |||||||||
Three Months Ended | |||||||||||||
March 31, 2008 | |||||||||||||
Average | Operating | Average | |||||||||||
Enterprise interest-earning assets: | (In thousands) | ||||||||||||
Loans, net(14) | $ | 29,925,013 | $ | 451,574 | 6.04 | % | |||||||
Margin receivables | 6,683,969 | 90,937 | 5.47 | % | |||||||||
Available-for-sale mortgage-backed securities | 9,281,381 | 110,072 | 4.74 | % | |||||||||
Available-for-sale investment securities | 169,848 | 2,835 | 6.67 | % | |||||||||
Trading securities | 572,817 | 10,708 | 7.48 | % | |||||||||
Cash and cash equivalents(15) | 1,468,776 | 13,833 | 3.79 | % | |||||||||
Stock borrow and other | 793,450 | 15,640 | 7.93 | % | |||||||||
Total enterprise interest-earning assets | $ | 48,895,254 | 695,599 | 5.70 | % | ||||||||
Enterprise interest-bearing liabilities: | |||||||||||||
Retail deposits | $ | 25,383,594 | 171,535 | 2.72 | % | ||||||||
Brokered certificates of deposit | 1,229,811 | 15,169 | 4.96 | % | |||||||||
Customer payables | 4,348,906 | 9,910 | 0.92 | % | |||||||||
Repurchase agreements and other borrowings | 7,980,130 | 94,934 | 4.71 | % | |||||||||
FHLB advances | 5,974,084 | 70,802 | 4.69 | % | |||||||||
Stock loan and other | 1,679,887 | 10,640 | 2.55 | % | |||||||||
Total enterprise interest-bearing liabilities | $ | 46,596,412 | 372,990 | 3.20 | % | ||||||||
Enterprise net interest income/spread(6) | $ | 322,609 | 2.50 | % | |||||||||
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income | |||||||||||||
Three Months Ended | |||||||||||||
March 31, | December 31, | March 31, | |||||||||||
2009 | 2008 | 2008 | |||||||||||
(In thousands) | |||||||||||||
Enterprise net interest income | $ | 274,593 | $ | 268,118 | $ | 322,609 | |||||||
Taxable equivalent interest adjustment(16) | (714 | ) | (691 | ) | (3,698 | ) | |||||||
Customer cash held by third parties and other(17) | 4,783 | 6,670 | 7,460 | ||||||||||
Net operating interest income | $ | 278,662 | $ | 274,097 | $ | 326,371 |
Supplemental Portfolio Disclosure | ||||||||||||||||||||||
Mortgage Loan Portfolio(18) | ||||||||||||||||||||||
One- to Four-Family Mortgage Loan Distribution | ||||||||||||||||||||||
Unpaid principal balances at March 31, 2009 ($MM) | ||||||||||||||||||||||
FICO | ||||||||||||||||||||||
LTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | |||||||||||||||
<70% | $ | 3,777 | $ | 680 | $ | 507 | $ | 309 | $ | 188 | $ | 4 | $ | 5,465 | ||||||||
70%-80% | 4,426 | 970 | 749 | 413 | 184 | 5 | 6,747 | |||||||||||||||
80%-90% | 86 | 31 | 29 | 24 | 12 | - | 182 | |||||||||||||||
>90% | 68 | 24 | 24 | 15 | 15 | - | 146 | |||||||||||||||
Total | $ | 8,357 | $ | 1,705 | $ | 1,309 | $ | 761 | $ | 399 | $ | 9 | $ | 12,540 | ||||||||
One- to Four-Family 30+ Days Delinquent Loan Distribution | ||||||||||||||||||||||
March 31, 2009 ($MM) | ||||||||||||||||||||||
FICO | ||||||||||||||||||||||
LTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | |||||||||||||||
<70% | $ | 145 | $ | 65 | $ | 65 | $ | 52 | $ | 29 | $ | 1 | $ | 357 | ||||||||
70%-80% | 483 | 206 | 174 | 109 | 51 | - | 1,023 | |||||||||||||||
80%-90% | 16 | 10 | 11 | 10 | 5 | - | 52 | |||||||||||||||
>90% | 14 | 6 | 5 | 6 | 6 | - | 37 | |||||||||||||||
Total | $ | 658 | $ | 287 | $ | 255 | $ | 177 | $ | 91 | $ | 1 | $ | 1,469 | ||||||||
Home Equity Loan Distribution | ||||||||||||||||||||||
Unpaid principal balances at March 31, 2009 ($MM) | ||||||||||||||||||||||
FICO | ||||||||||||||||||||||
CLTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | |||||||||||||||
<70% | $ | 2,125 | $ | 360 | $ | 289 | $ | 126 | $ | 100 | $ | 10 | $ | 3,010 | ||||||||
70%-80% | 1,033 | 291 | 243 | 94 | 82 | 1 | 1,744 | |||||||||||||||
80%-90% | 1,693 | 566 | 527 | 215 | 146 | 1 | 3,148 | |||||||||||||||
>90% | 883 | 296 | 247 | 127 | 78 | - | 1,631 | |||||||||||||||
Total | $ | 5,734 | $ | 1,513 | $ | 1,306 | $ | 562 | $ | 406 | $ | 12 | $ | 9,533 | ||||||||
Home Equity 30+ Days Delinquent Loan Distribution | ||||||||||||||||||||||
March 31, 2009 ($MM) | ||||||||||||||||||||||
FICO | ||||||||||||||||||||||
CLTV | >=720 | 719-700 | 699-680 | 679-660 | 659-620 | <620 | Total | |||||||||||||||
<70% | $ | 24 | $ | 11 | $ | 15 | $ | 7 | $ | 7 | $ | 1 | $ | 65 | ||||||||
70%-80% | 40 | 24 | 22 | 11 | 11 | - | 108 | |||||||||||||||
80%-90% | 139 | 68 | 71 | 31 | 26 | - | 335 | |||||||||||||||
>90% | 91 | 46 | 41 | 25 | 14 | - | 217 | |||||||||||||||
Total | $ | 294 | $ | 149 | $ | 149 | $ | 74 | $ | 58 | $ | 1 | $ | 725 |
Investment Securities Portfolio | |||||||||||||||||||
Book value at March 31, 2009 ($MM) | |||||||||||||||||||
AAA | AA | A | BBB | Below | Total | ||||||||||||||
Mortgage-backed securities backed by U.S. Government sponsored and federal agencies | $ | 11,118 | $ | - | $ | - | $ | - | $ | - | $ | 11,118 | |||||||
Collateralized mortgage obligations and other | 577 | 64 | 9 | 33 | 214 | 897 | |||||||||||||
Municipal bonds, corporate bonds and FHLB stock | 214 | 12 | 64 | - | 20 | 310 | |||||||||||||
Total | $ | 11,909 | $ | 76 | $ | 73 | $ | 33 | $ | 234 | $ | 12,325 | |||||||
SUPPLEMENTAL INFORMATION
Explanation of Non-GAAP Measures and Certain Metrics
Management believes that EBITDA, interest coverage, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. Management believes that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.
Reporting Changes
Beginning in the first quarter of 2009, the Company revised its segment financial reporting to reflect the manner in which its chief operating decision maker had begun assessing the Company’s performance and making resource allocation decisions. As a result, the Company now reports its operating results in two segments: 1) “Trading and Investing”, which includes the businesses that were formerly in the “Retail” segment and now includes the Company’s market-making business, and 2) “Balance Sheet Management”, which includes the businesses from the former “Institutional” segment, other than the market-making business.
Corporate Cash
Corporate cash represents cash held at the parent company. The Company believes that corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries.
EBITDA
EBITDA represents net income (loss) from continuing operations before taxes, depreciation and amortization and corporate interest expense. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.
Interest Coverage
Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.
Bank Earnings Before Taxes and Before Credit Losses
Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company ("ETBH" or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital.
Enterprise Net Interest Income
Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income, corporate interest expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.
Enterprise Interest-Earning Assets
Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances and cash that earns interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.
It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income (loss), consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report the Company expects to file with the SEC with respect to the financial periods discussed herein.
ENDNOTES
(1) Because the Company reported a net loss for the periods presented, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.
(2) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.
(3) Amounts and percentages may not calculate due to rounding.
(4) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing income (loss) before other income (expense), income taxes and discontinued operations by total net revenue.
(5) Corporate cash is an indicator of the liquidity at the parent company. Corporate cash for March 31, 2009 and December 31, 2008 includes $30.0 million and $45.3 million, respectively, which we invested in The Primary Fund and is included as a receivable in the other assets line item as The Reserve Fund has not indicated when the funds will be distributed back to investors.
(6) Enterprise net interest spread is the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities and customer cash held by third parties.
(7) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“ETBH” or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital(a). Below is a reconciliation of Bank earnings before taxes and before credit losses from Loss before income taxes and discontinued operations:
Q1 2009 | Q4 2008 | Q1 2008 | ||||||||||
Loss before income tax benefit and discontinued operations | $ | (344,056 | ) | $ | (445,342 | ) | $ | (149,575 | ) | |||
Add back: | ||||||||||||
Non-bank loss before income tax benefit and discontinued operations(b) | 87,540 | 85,542 | 90,285 | |||||||||
Provision for loan losses | 453,963 | 512,874 | 233,871 | |||||||||
(Gain) loss on securities, net(c) | (16,507 | ) | 11,410 | 8,069 | ||||||||
Bank earnings before taxes and before credit losses | $ | 180,940 | $ | 164,484 | $ | 182,650 |
(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.
(b) Non-bank loss represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.
(c) (Gain) loss on securities, net is included in the Gain (loss) on loans and securities, net line item on the consolidated statement of loss.
(8) During the first quarter of 2009, we updated the definition of an active Complete Savings Account. Prior to this update, all Complete Savings Accounts were considered an active account including those accounts with a nominal positive balance. Subsequent to this change, only Complete Savings Accounts with a balance of $25 or more are considered an active account. We believe this change improves the usefulness of our Complete Savings Account metric as it is now more consistent with our definition of an active brokerage account. The impact of this change is summarized in the table below. All prior periods presented have been updated to reflect this change.
Q4 2008 | Q1 2008 | |||||
Previously reported end of period banking accounts | 916,961 | 858,942 | ||||
Reduction due to revised definition | (99,738 | ) | (59,370 | ) | ||
Revised end of period banking accounts | 817,223 | 799,572 |
(9) During the first quarter of 2009, we updated the definition of an active customer to exclude customers that only have a Complete Savings Account with a balance of less than $25. Net new customers from discontinued operations and other consists of customers related to our discontinued operations and the impact of an improvement in our customer identification methodology implemented during the second quarter of 2008. All prior periods presented have been updated to reflect this change.
(10) Excludes customer payables (cash) from discontinued operations.
(11) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts.
(12) Q109 estimate based on the regulatory minimum well-capitalized threshold.
(13) Includes unpaid principal balances and premiums (discounts).
(14) Excludes loans to customers on margin.
(15) Includes segregated cash balances.
(16) Gross-up for tax-exempt securities.
(17) Includes interest earned on average customer assets of $2.8 billion, $3.0 billion and $3.3 billion for the quarters ended March 31, 2009, December 31, 2008 and March 31, 2008, respectively, held by parties outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.
(18) LTV/CLTV data is based on LTV/CLTV ratios at the time of loan origination, and has not been updated to reflect changes in property values since that time. CLTV calculations for home equity lines of credit are based on drawn balances. FICO score is based on FICO scores at the time of loan origination, and has not been updated to reflect changes in credit scores since that time.
CONTACT:
E*TRADE FINANCIAL Media Relations Contact
Pam Erickson, 617-296-6080
pam.erickson@etrade.com
or
E*TRADE FINANCIAL Investor Relations Contact
Brett Goodman, 646-521-4406
brett.goodman@etrade.com